Credit Files 101

A common conversation that I have with my husband and customers alike is the topic of Credit Files being included in our High School curriculum.

With both your Credit Report and Credit Score forming part of the decision process for most lenders, it is important to understand what impacts your Credit Report.

However, when speaking with customers they are generally unaware what a Credit File is and how their lifestyle choices can impact their Credit Score and lending ability.

This is why for me it is a no brainer that this subject should be added to our learning base prior to leaving school.

So … is it a Credit File or Credit Report?

A Credit File is where your information is stored with the credit bureaus, whereas your Credit Report is what is generated from your Credit File.  When your Credit Report is generated, it will also generate your Credit Score.

A Credit Report holds information relating to your credit history, so it is common for service providers such as utility companies and credit providers to complete a credit check to obtain a clearer picture of your credit worthiness.

Even if you have never applied for finance, it is likely that you will still have a Credit File if you have ever applied for a utility service such as a landline phone, mobile phone, electricity, or gas account.

What is contained in my Credit Report?

Good question!  Your Credit report contains your personal details, consumer and commercial credit information, and publicly available information.

So depending on the credit bureau, you will generally find your report will detail:

    • Your name, date of birth, drivers license, residential address history and employer details.
    • Credit applications you have made for both personal and commercial use.
    • Credit account details including the type of credit, credit limits, dates the accounts were opened and/or closed.
    • Monthly payment history on credit accounts, reflecting whether the required payment on your financial accounts was made on time or not for each month.
    • Details of overdue debts like payments defaults.
    • Details of overdue commercial accounts.
    • Details of court judgements and court writs, directorship details, proprietorship details and bankruptcy, debt agreement and personal insolvency information.
    • Your Credit Score.

How is my Credit Score determined?

Your Credit Score is generated at the time of a Credit Report being run.  For example, an Equifax Score will range from 0-1200 depending on the information contained in your Credit Report at the point in time of being generated.  Currently the credit bureaus have their own ways of calculating the Credit Score and the algorithms for each are not known.  So your Credit Score could vary depending on who you obtain your report from, and also your score could be affected differently by each credit bureau depending on changing details on your file.

Your score depends on the information contained within your Credit Report, or what is known as “Contributing Factors”.  Contributing factors to your Credit Score can be good or bad information.  Quantity of inquiries for example.  A low value of enquiries over time could increase your score, whereas a high value could decrease your score.  Things like good account conduct versus bad account conduct, late repayments, and even the type of credit enquires made.

So even what I am applying for will affect my Score too?

Absolutely!  Now remembering that the algorithms are privileged information so we don’t know exactly how, though generally from experience higher risk lending enquiries might have a greater negative effect on a score.  For example, quick and easy to get small loans of under $3,000 as well as buy now pay later accounts have the potential to have a greater impact on your score.  Contributing factors such as enquiry type and frequency may form part of the lenders’ determination of your credit worthiness.

So it’s not just about my score?

Correct, it is also about the contributing factors contained in your Credit Report, and how the lender uses this information to conduct their own Credit Scoring, in conjunction with their lending policy and guidelines.  Even if you have a good Credit Report, your application with a lender could be declined based on one piece of information, or one contributing factor.

That is why as part of my process I obtain a Credit Report prior to submitting any application for a customer.  Your Credit File is something I am very passionate about protecting, and I do this by avoiding any unnecessary declines through researching your overall profile with prospective lenders.  You see, it’s all about the contributing factors.

I hope this has been informative for you and has provided some insight into Credit Reports.

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